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Time to STOP New Zealand's pension rip-off

People entitled to a New Zealand pension, New Zealand Superannuation, who also receive an employer/employee-funded overseas pension, are likely to be in for an unpleasant surprise: their overseas payouts will be deducted from their New Zealand Super. This is called Direct Deduction. If this person’s overseas retirement payment exceeds the NZ Super rate for one individual, the “excess” amount is carried over to their partner’s entitlement and deducted from his or her NZ Super. This is called Spousal Provision. The practice is governed by Section 70 of the Social Security Act.

In a worst-case scenario, one partner’s high overseas retirement income can cancel out a couple’s combined New Zealand pension entitlement. The New Zealand government uses other states' contributory pension provisions for the payment of the NZ Super benefit.

A bad Super surprise for immigrants and Kiwis

This policy affects not only immigrants but also a growing number of New Zealanders, due to increasing global mobility and international work histories. It has been identified as highly unfair, but so far no changes to the law have been made.

This website highlights a number of points why this is so, how the Government is trying to keep the issue off the agenda and what this does to the people affected by Section 70.

While there are many aspects of the New Zealand pension law that need to be addressed, the primary aim of this website is for contribution-funded overseas pensions to be exempt from abatement against tax-funded NZ Super. Only overseas pensions similar to NZ Super, including tax-funded pensions for civil servants, must be deducted from NZ Super. Most urgently, however, the Spousal Provision rule needs to be discontinued as it is in breach of Human Rights and constitutes discrimination on grounds of family status.

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Facts and figures

o People with overseas pensions living in New Zealand: As of October 2017,

89,336 pensioners were affected by the Direct Deduction Policy and 588 by the Spousal Provision. (But significantly more people are affected, see next point "Misleading statistic".) According to MSD, this saved the NZ government more than NZ$ 336 million in NZ Super payments. Discontinuing the Spousal Deduction would cost NZ$ 2,7 million.

When we started this website in 2010, we had to use the statistic of the Ministry of Social Development from 2008. According to this statistic, 52,756 people received overseas pensions in New Zealand. Until July 2012 this number had risen to 63,989, and at the end of December 2015 it already stood at 83,754. Most are from the UK (56,745, compared to 47,898 in 2012 and 41,359 in 2008), Australia (15,309, compared to 8,953 in 2012 and 4,918 in 2008), and the Netherlands (4,120, compared to 3,588 in 2012 and 3,324 in 2008). Number four is Canada with 2,060. All other countries provide overseas pensions for less than 1,000 people. (More details from 2008 here.) The total number has been increasing steadily, from 42,336 (2004) to 46,996 (2005), to 51,464 (2006), and after a slight drop in 2007 to 50,019 up again to 52,756 in 2008 and 63,989 in 2012.

According to information given to the "Sunday Star Times" in mid July 2012, 24 per cent of those 64,000 retirees had deductions higher than NZ$ 5000 a year. At the end of 2015, 247 people had weekly (!) deductions of NZ$ 400 and more, this is more than NZ$ 20,000 per year!

o Misleading statistic: The MSD statistic is misleading, as only overseas pensions of people are counted who also receive a portion of NZ Super (and if it is only one dollar) because their overseas pensions are lower than NZ Super. Immigrants and returning Kiwis who miss out on NZ Super completely are not counted. Therefore the number can be dramatically higher. We happen to know the number of German pensions paid into New Zealand. As of June 2010 exactly 802 people in New Zealand received a German pension. The MSD statistic of June 2008 listed 200 German pensions. Even if this number is slightly higher now it means that 75% of people with German pensions do not receive any NZ Super thanks to the Direct Deduction Policy - and that the total number of all nationalities missing out completely is several thousands higher than the nearly 84,000 published by MSD (December 2015).

Update: in 2015 the German Pension Insurance (Deutsche Rentenversicherung) paid out 961 employer/employee-funded pensions to New Zealand residents, 645 of those were paid to German citizens. 381 individuals received various amounts of NZ Super, that's roughly 40%. "Only" 60% missed out completely. The higher percentage of people receiving NZ Super payments was the result of the high NZ dollar.

o Spousal Provision policy: 124 people were affected by Spousal Provision in 2009. Numbers here also rising, in 2010 it was at about 200 and 588 in October 2017. Several couples affected by this policy have sued the Ministry of Social Development. After many delays the case was heard by the Human Rights Review Tribunal in March 2018.

o The myth of a universal pension: The Crown Law Office defends Section 70, asserting that a couple can be perceived as a single economic unit. This is questionable as NZ Super is not a needs-based or means-tested system, and is received by some of the nation's wealthiest citizens as individuals in their own right, whether married or not, and regardless whether both of them have ever worked and paid taxes.

o NZ Super overseas: At the end of June 2008, 13,825 people living overseas were receiving New Zealand Superannuation (and 38 Veteran's Pensions) - at the time all at drastically reduced rates. Pensions overseas were paid at a rate of 50%; now they are proportional to time spent in New Zealand. So a total of 66,581 people did not get full NZ Super and many more none at all. And it is only paid to people who are ordinarily resident in New Zealand when applying for NZ Super.

o Pensions similar to NZ Super: Only eight other countries and one city pay a universal pension with no test other than citizenship, residence and age, comparable to NZ Super: Mauritius, Namibia, Botswana, Bolivia, Nepal, Samoa, Brunei, Kosovo and Mexico City.

The English language doesn't help to distinguish state pensions and employer/employee-funded overseas pensions. In e.g. French and German there is a clear distinction: you have "rente" and "Rente" for contributory pensions and "pension"/"Pension" for the tax-funded pensions for civil servants. The term "rente"/"Rente" is derived from the Latin verb reddere (French: rendre, English: render). This means: to give back, to return. It implies that people receive a "rente" (or: render) only if they have been a contributory member of an insurance or investment scheme; it is a revenue from an asset or a capital. Contrary to that, a pension is granted to pensioners from a fund they did not have to contribute to, as is the case with civil servants.

o Ministerial mind twist: In its 2005 Review the Ministry of Social Development stated that only overseas pensions that are similar to NZ Super should be deducted, and that earnings-related second tier overseas pensions have little resemblance to NZS. In the 2007 Review the deduction of "fundamentally different" pensions was justified with the following mind twist: "Both pensions are nevertheless state social security pensions that are paid for the same purpose." This states that both kinds of pensions are - pensions. The Chief Executive of the Ministry of Social Development has the almighty power to decide which overseas pensions can be deducted from NZ Super. We urge the Government to take this overwhelming power off this one single civil servant and stop deducting overseas pensions that are not similar to NZ Super. Read more about the findings of the famous Reviews.

o The Government's justification of the injustice: Paying a person NZ Super and not deducting his/her overseas pension would place him/her in a better position than a New Zealander who has never left the country. The truth is that a lifelong New Zealander married to someone with an overseas pension might not get any NZ Super at all. He is worse off. People who have spent 50% of their working life in New Zealand might get 0% NZ Super. Parliamentarians, civil servants and others enjoy special treatment at taxpayers' cost. More about this on our Offenders and Letters from Wellington pages.

How much the NZ government cashes in from other countries

(Statistic by the Ministry of Social Development, June 2015)

In the meantime the number of affected pensioners has risen to 89,336 (October 2017) and the total amount taken off these people stands at NZ$ 336,290,646 and perhaps already at NZ$ 340 million!

See full table of the steady rise of the numbers of affected pensioners and the amounts taken off them by the New Zealand government from 2009 to 2015

at the very bottom of this page.

1. Amounts are per year in NZ$

2. The number of pensioners includes only those who receive a portion of NZ Super, and be it only a few dollars. Those who miss out on NZ Super completely are not included.

The figures in the category over NZ$ 15,000 and a proportion of those in the category 10,001 to 15,000 included pensioners who had a Kiwi partner who had never left the country. They did not receive any NZ Super and, on top of this, had to pay for their partners' NZ Super (Spousal Provision).

More detailed table from 20 July 2012:

More Problems than just Section 70: Warnings and Dangers

We have linked another website with NZ Pension Protest. www.dontmovetonewzealand.comdelivers a summary of the problems around the Direct Deduction Policy and portability, as well as NZ-specific financial pitfalls of relationship property when a relationship goes wrong.

We do not fight Section 70 only but also the unlawful taxation of a few overseas pensions by New Zealand's tax authority (IRD). The Double Taxation Agreements with Germany, the USA, France, Finland and the Philippines rule that only the country where the pensions originate can tax them. More information on our DTA page.

NZ First MP Fletcher Tabuteau has withdrawn his Draft for Consultation on the “New Zealand Superannuation and Retirement Income (Fair Residency) Amendment Bill (Member’s Bill)” a month ago. This bill had suggested to abolish Section 70 and raise the residency requirement for NZ Super to 20 years. No explanation yet as to to why the bill has been withdrawn. NZ First stepping off from their own policies?

A hearing on Spousal Provision/Deduction has taken place at the Human Rights Review Tribunal (HRRT) in Wellington from 5 to 14 March 2018. It can take two months to two years until the Tribunal makes a decision.

Three plaintiffs were legally represented by the Office of Human Rights Proceedings (OHRP) in the case against the Ministry of Social Development/Attorney General, claiming the spousal deductions are discrimination on grounds of family and marital status.

The scandalous treatment of people with overseas pensions has reached new heights. Carmel Sepuloni, the Minister of Social Development, has clarified that pensioners who are not receiving NZ Super (because their overseas pension is deducted from it) will not receive the Winter Energy Payment!

This means: First they steal the overseas money from these people, resulting in them not receiving NZ Super and falling into poverty, and then they pay the heating supplement to millionaires but not to the people they impoverish… This is a scandal of epic proportions.

"No changes planned"

Finally the new Minister of Social Development, Carmel Sepuloni, has answered a few letters from pensioners enquiring about her stance on Section 70.

The stock-phrase reply is as follows: "The issue is complex and I have asked officials from the Ministry of Social Development to look at certain aspects of the direct deduction policy and report back to me later this year. At that stage, I will have a better understanding of the impact any change may have on particular supperannuitant groups. Currently there are no planned changes."

Let us remind her of her time in Opposition and quote her from a letter, sent to a pensioner in December 2016: "In particular the issue of spousal provision is something Labour agrees needs further review and consideration."

To prevent complete memory loss, a widespread phenonemon amoung politicians, we would like to remind Prime Minister Jacinda Ardern of her commitment to stop the unfair overseas pension deductions in 2012. She drafted terms of reference for a Social Security Select Committee inquiry into the issue, as she was convinced an injustice was being perpetrated upon people who had worked in New Zealand for years, only to find their NZ Super payments dramatically reduced because of having earned KiwiSaver-like pensions overseas.

Among other things she said in the Sunday Star Times on 08 July 2012:

“There is a question of fairness.”

“I have seen some terrible cases.”

“I receive many letters on this issue and I am sure most electorate
MPs do too.”

As recently as before the General Election last September Jacinda Ardern told us her government would look into the issue if elected, and promised the same to several pensioners. However, we heard from NZ First that demands to changes to Section 70 "died during the coalition negotiations".

Letters to the PM are forwarded to Carmel Sepuloni, the new Minister of Social Development, and from there barely anyone who wrote to her has received a reply. We wonder if it is due to incompetence, ignorance or contempt.

28 November 2017

Chinese pensions are as government-administered as other overseas pensions. Why are they not deducted from NZ Super? Read more on the nature of Chinese pensions here (click link).

03 November 2017

Two new pages have been added to the "The Fight" section on this website:

(The latter is a masterpiece in dissecting Crown Law's dishonest and misleading response to the Human Rights Council of the United Nations, after a complaint of a group of pensioners against the discriminatory deduction of contributory overseas superannuations by the New Zealand government.)

26.09.2017

Boyle "unfit for office"

It is worth mentioning that the fitness for office of MSD CEO Brendan Boyle has been questioned, as he kept on allowing staff using fake names in benefit review committees. The Social Security Appeal Authority ruled that this was unacceptable, and referred the issue to Solicitor-General Una Jagose. Read more on it here and here (click links).

Contacts in New Zealand

Since the General Election in September 2017 some faces have changed but nothing has happened regarding Section 70. A re-write of the Social Security Act has been announced since 2014. But don't get fooled. The intention is to "translate" outdated language and overhaul the innumerable changes that have occurred over many decades. It does NOT mean that the legislation will change.

Minister for Social Development:

Carmel.Sepuloni@parliament.govt.nz

Minister for Senior Citizens:

Tracey.Martin@parliament.govt.nz

No change in the position of Chief Executive of the Ministry of Social Development. The man in charge is still Brendan Boyle.

He is the successor of all overseas pensioners' arch-enemy, Peter Hughes.

Address your complaints about the Direct Deduction Policy to Brendan Boyle- although we do not think this will change anything. We just want him to see that we have not retired from protesting...